Dear Readers,

Today, we talk about maximising rental profits! (Or profit maximisation maybe? I couldn’t decide how to better describe it). Specifically, maximising profits from rentals you already have (i.e. the tenants are already in and you want maximum rental yield). This post is not so much about maths, as it is about “philosophy”.

This post is directed primarily to landlords, who have a handful of properties. Actually, the advice itself is universal advice, and everyone (in my opinion at least), should follow it, if they want to achieve the stated goal (maximising rental profits). However, those who are likeliest to follow it, are landlords with a handful of properties (because it’s not so hard under those conditions to implement the ideas). Those just starting off, should also start off with this in the forefronts of their thoughts, so as to build “life forming habits”. (I saw that phrase on a book cover the other day…). 

Now, for those who have tens or hundreds of properties, if you’re not doing this, you’re almost certainly losing tons of money as we speak. However, I admit that it might be hard to get into if you’re not into this already. Enough of the hype though, let’s get into it…

It’s actually quite simple. To make maximum profit out of any one Property, you need to keep your eye on the ball (to borrow a phrase from football :-). The most important thing, is for you to actually know what’s going on in the property. What do I mean exactly? The best way to put it, is using an example.

Silence of the Lamps

The other day, a property manager (PM) got in touch with me, to tell me that a lamp had broken in my property, and that I should fix it. Now, here’s the funny thing. The property in question, was not rented out as furnished. I only provided white goods (i.e. fridge, oven etc). So, there’s no way that I could have been responsible for getting a lamp fixed.

What the PM probably meant, was a “light fitting” or “light fixture”. So, I asked him politely, what exactly he meant, and he did not know. A case of the old “Chinese Whispers” for sure, except that no one is whispering, and there are only 3 people playing. Now, the PM said he’d check, which is fair enough, and the correct recourse noting the circumstances.

However, what is already clear to me at least, is that the PM does not really know what’s going on in the property. How can he, if his only information for me, is that a “lamp” is broken? Either he does not know what a lamp is (doubtful I would think), or he has forgotten that the property was not let out furnished. 

Yes, it seems he’s taken his eye off the proverbial ball, or perhaps more likely, is that he never had his eye on the ball to begin with. And this is the point that I’m trying to make. As the landlord, I could have said “OK, I’ll pop over” or “arrange for it to be fixed”. I confess, that I have done that in the past, and I still occasionally do it now. However, I always make a note of exactly what’s going on, even if belatedly, and I certainly, don’t make it a habit to take action on incomplete information. 

So, what is the right course of action, in the case above? Well, when a tenant says “a light fitting is broken, fix it”, one should ask the following questions:

1. Which fitting do you mean exactly (which room, which fitting exactly)?
2. Are we sure it’s not just a bulb which needs changing?
3. How did it break?

“I don’t know” is regrettably, not a sufficiently good answer for any of the questions above. In the UK especially, if you send out an electrician to “take a look”, a simple bulb change could cost you £50 without you getting ripped off (by that I mean that an electrician travelling to your property and changing a light bulb, is entitled to get paid £50, because it’s likely to have taken him at least half an hour, possibly closer to an hour, to come and go from your property). Now, if you’re unlucky, there could be a call out charge (e.g. £70), plus the bulb (£4), plus VAT (£14.5ish), so that’s almost £90. If you’re really unlucky, then the electrician could take you for a ride, and make it £200.

Hence, if you don’t want to be out of pocket, you must insist that you get some proper answers. It’s also wise to say in advance of any trip you make out “if I [or an electrician] come to the property, and it turns out that this is not the responsibility of the landlord (i.e. the bulb needs changing), whatever expenses are incurred will be charged to you”. 

Now, the above, sounds like a bit of a stupid issue, but I have heard variants of the above story countless times. In most cases, it’s a “bad tenant” (not an evil one, by any means, just someone who for whatever reason, cannot or will not properly assess a situation). I’ve heard of tenants not bothering to check whether the light bulb was burned out, but claiming to have done so. The electrician shows up, and says “it was the bulb… so that’s £50 mate”, and then it all kicks off…

So, in order to avoid this situation (and others like it), make sure you ask the right questions. Then, ensure that you keep a record of the answers! If you have a number of properties, that you’ve supplied with white goods and light fittings, and bathtubs, electric showers and all the rest of it, it’s very easy to forget which light fitting you last fixed in which house, in which room. Light fittings are easy and relatively inexpensive, but if you take your eye off the ball, you might end up taking poor decisions on other items, e.g. fixing humidity problems caused by the tenant or spending £1300 to repair plumbing problems which should have cost must less to fix. 

It doesn’t matter if you’ve got a little book you write the things down in, or an excel file or some £2,000 property management software. Make a record, and know how to bring that record back up (i.e. don’t forget where you put that little book). With some experience, you’ll learn what things should be recorded, and you’ll be maximising rental profits. (How many times I can use that phrase?!). If in any doubt, record as much information as possible. In my opinion, you should record at least:

-exactly what the issue was
-how the problem came to be
-what the fix was
-who did it (who fixed it)
-the date of the repair
-the price of the repair

Now, this may sound like a lot, but actually, this is all stuff you’d know anyway if it happened in the house you live in. Ultimately, for the most efficient solutions (for the purpose of maximising rental profits), you need to handle any property you rent out, as you would the property you live in. Easier said than done though! 

And with that, dear Readers, yet another post comes to an end. Was it as good for you as it was for me? I do hope so. If yes, please comment and share similar stories, and if you have that extra minute, tell me your favourite light bulb joke. My wife says it might well be the time now to let someone else make the jokes…

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